Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes 3rd cut to renewables company outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel rates
(Adds expert, background, detail in paragraphs 2-3, 9-11)
By Elviira Luoma and Essi Lehto
HELSINKI, Sept 11 (Reuters) - Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel business for the third time this year due to falling costs and likewise lowered its anticipated sales volumes, sending the company's share price down 10%.
Neste stated a drop in the price of regular diesel had affected what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock remained high.
A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has actually created a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent market.
Neste in a declaration slashed the anticipated average similar sales margin of its renewables unit to in between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed below the $600-$800 seen in February.
The business now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually predicted since the start of the year, it included.
A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now expected to offer between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable products' sales rates have been adversely impacted by a significant reduction in (the) diesel rate throughout the 3rd quarter," Neste stated in a statement.
"At the exact same time, waste and residue feedstock prices have not reduced and renewable product market price premiums have actually stayed weak," the business added.
Industry executives and experts have actually said quickly expanding Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have announced they are pausing expansion in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel price was to be anticipated, Inderes expert Petri Gostowski said.
Neste's share cost had reversed some losses by 1037 GMT however stayed down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki; Editing by Terje Solsvik and Jan Harvey)